This assignment is to test your understanding of Demand & Supply. Each question should be answered in your own words accompanied by a diagram showing what is happening to demand & supply. Please use graph paper for your diagrams.

Based on your knowledge of elasticity, explain why governments impose sin taxes. Explain what would happen if government increased the excise tax on gasoline by 20 cents per litre. The current price is at equilibrium.

Use a diagram from the following information to demonstrate. What is the new equilibrium price? Who would pay the tax?

Price per L Quantity demanded Quantity Supplied

(millions of litres)

$1.00 18 2

1.20 16 6

1.40 14 9

1.50 12 12

1.60 10 15

1.70 8 18

1.80 6 21

1.90 4 24

2.00 2 27